Tenants Enjoy Protections When Landlord/Homeowner Loses Property to Foreclosure

These days, foreclosures are commonplace. Our natinal economy is experiencing the hangover following years of a credit party reminiscient of a fraternity blow-out. A recent magazine article quoted the CEO of mega-homebuilder Toll Brothers spreading the blame:

“What cracked the market was not just our greed but the greed of our buyers.”

Irrespective of the cause, thousands of tenants have received a nasty and unexpected surprise -- news that the home they are occupying has been foreclosed. Even worse is that in most instances the new owner -- often the mortgage lender -- has plans for the property that don't include continuing the lease. Frequently, the tenant has been faithfully paying rent to the landlord, and wasn't even aware that the property was subject to foreclosure. Imagine the financial disaster that can accompany being suddenly and unexpectedly displaced from a comfortable rental home...

Fortunately, Texas law provides some relief for an unwitting tenant of a foreclosed property.

First, the notice period required before a landlord may file an eviction suit is extended from 72 hours to 30 days (provided the tenant was in compliance with the lease at or near the time of foreclosure). See Texas Proeprty Code Section 24.005.

Second, if the previous owner's interest in the premises is terminated by sale, assignment, death, appointment of a receiver, bankruptcy, or otherwise, the new owner (other than the foreclosing bank, itself) is liable for the return of security deposits. See Texas Property Code Section Sec. 92.105.

I have heard of instances where new owners of properties acquired through foreclosure or trustee's sale have actually offered to pay a pre-existing tenant to vacate the property promptly and peaceably. Such a payment can make sense for both the new and reluctant owner/landlord and the innocent tenant. The new owner obtains certainty and finality concerning possession of the property -- all without incurring attorneys' fees associated with an eviction proceeding. Meanwhile, the tenant receives a quick infusion of cash to help offset moving and related expenses.

If you are either the new owner of a tenant-occupied property, or a tenant in a rental property whose ownership has changed through foreclosure, you should consider consulting an experienced real estate attorney who can explain your rights and responsibilities.

11 Face Justice in Mortgage Fraud Scheme -- San Antonio Real Estate Investment Fraud

On a one-block street in Northwest San Antonio, five properties all fell into foreclosure in 2003. When federal investigators began poking around, they tied the properties on Meadow Field near Grissom Road to an Austin-based house-flipping ring.

Eleven members of that 16-person ring -- which includes three real estate agents, an attorney, a mortgage broker and a former Wells Fargo bank officer -- are set to be sentenced today in U.S. District Court in Austin after being found guilty of wire fraud, money laundering and falsifying information on loan documents as part of this scam that hit Austin and that San Antonio neighborhood.

The Austin ring is part of a swelling wave of mortgage fraud that isn't expected to crest until late next year. Texas is among the top 10 states for mortgage abuses, and San Antonio is involved in three such scams so far this year, the Austin case and two San Antonio-based rings under investigation by the Federal Bureau of Investigation. The San Antonio rings used more than 50 people to inflate prices in Stone Oak, Spring Branch and Dallas.

FBI special agents investigating the cases have said that arrests would happen soon this summer. “Typically what happens is incidents are not identified until months after the loans were originated, so many (federal) agencies are just closing cases from 2000 and 2001,” said Tom Chmielewski, vice president of products and strategy at ChoicePoint which owns the Mortgage Asset Research Institute. “I expect the fraud to be at elevated levels for the next couple of years.”

The increased fraud activity has its roots in the housing boom and the popularity of no-documentation loans -- loans where information entered about the background and finances of buyers were not verified. “A lot of it popped up in the last four to five years particularly with no-doc, low-doc loans because nobody was verifying anything,” said Jim Gaines, a research economist at the Real Estate Center at Texas A&M University.

Nationwide, financial institutions reported 46,717 cases of suspicious activity in mortgage lending in fiscal 2007, according to the FBI. That's a 31 percent increase from fiscal 2006, when lenders began to loosen lending guidelines, and a 574 percent increase since fiscal 2003, when the housing boom started to take off. Most of the cases are in Texas, California, Colorado, Florida, Georgia, Illinois, Michigan, Minnesota, New York and Ohio, according to the FBI's 2008 mortgage fraud report. One study by mortgage insurer Radian Group found that 10.5 percent of all mortgages it had insured in Texas in 2007 showed signs of “misrepresentation,” according to Rick Gillespie, Radian senior vice president.

The cases typically feature an appraiser who agrees to provide inflated appraisals for a kickback, and “straw buyers” -- people who rent out their personal information to another person for the purchase of a house with the understanding that home will be sold in a quick flip to another buyer after a few months.

According to the indictment in the case of the Austin-based fraud ring, Austin resident Cornelius Robinson created a company named Billionaires Boys Club Investments Inc. (BBC) and then recruited his wife and former real estate agent Silvia Seelig, Austin lawyer George H. Watson, former Wells Fargo personal banker Doris Ann Hill, and Robinson's uncle and friends to help buy 25 properties using fraudulent practices.

The team falsified addresses and telephone numbers for straw buyers, as well as rental histories, employment histories and bank deposits, according to the indictment. In San Antonio, BBC bought five fourplexes on Meadow Field on Aug. 14, 2001, for $100,000 each and then sold them during the same month to an “unindicted co-conspirator” for $157,000 each. The second buyer sold four of the properties about eight months later to another “unindicted co-conspirator” for $167,000. At some point, the mortgage payments no longer were being paid and lenders foreclosed on all five properties in 2003, according to the court record.

When so many foreclosures happen close together, it can hurt home prices.

Within San Antonio's Great Northwest area, where the Meadow Field properties are located, the median price dropped 2.4 percent in 2004, the year after the five properties were foreclosed, according to the San Antonio Board of Realtors.

In January 2008, 16 people were indicted for having participated in BBC's mortgage scams. Seelig, Watson, Hill and eight other defendants pleaded guilty to charges related to wire fraud, money laundering and making false statements on loans and will be sentenced today.

Robinson went to trial and was convicted of five counts of wire fraud, seven counts of money laundering and nine counts of making false statements on loans, according to the U.S. Attorney's Office. His case is set for sentencing on June 20.

In the two ongoing local investigations, FBI special agent David Rawlings who is leading the investigation, says 54 people committed mortgage fraud to buy 112 houses in Stone Oak, Spring Branch and Dallas.

Because the investigation is ongoing, Rawlings would not give many details about the cases. But he did say that in some instances, the straw buyers bought and flipped homes with the help of two San Antonio-based mortgage brokers. In other cases, a buyer purchased a new home at a discount, but got the builder to falsify the mortgage documents by saying the house was sold for a higher price than it was. After the inflated loan closed, the buyer paid the builder a kickback.

Rawlings explained that in San Antonio, several of the cases involved new construction. San Antonio overbuilt homes in 2006 and 2007, and for the past two years, builders have started fewer houses in an effort to sell off their existing inventory. Such scenarios can create a climate ripe for fraud, Rawlings said. “Where there's newer construction, you have a lot of desperate sellers and builders,” Rawlings said. “The losses have been up to $400,000 and $500,000 on some million-dollar homes.”

Such fraud techniques are not exclusive to Texas. One of the largest publicized cases this year happened in Chicago, where lenders lost an estimated $25 million on more than 150 properties after loan officers, processors, a CPA, a real estate agent and developers falsified employment, assets and rental history for straw buyers.

Real estate and foreclosure experts say the frenzy of the housing boom created the atmosphere where such widespread fraud could flourish. The fraud mushroomed as lenders faced rising pressure to increase sales. “I've talked with loan officers who routinely said they'd deny a loan and their bosses would come back and say, ‘Approve it,'” said Rick Sharga, vice president of marketing at RealtyTrac Inc. that monitors foreclosure activity. “When the loan officer said, ‘The loan doesn't fit our lending standards,' (then) the supervisor would say, ‘That's OK. Somebody will buy it.'”

From the SA Express News.

San Antonio Attorney Trey Wilson handles real estate fraud lawsuits, including suits involving real estate investors. As reported by Scene in SA Magazine, Wilson was recently voted by his peers as one of San Antonio's Best Real Estate Litigation Attorneys. He handles a variety of real estate claims and lawsuits, including fraud claims related to residential and commercial properties. As a licensed real estate Agent, Trey Wilson is a San Antonio lawyer who is uniquely attuned to real estate transactions and the duties of the parties to such transactions. He routinely represents Out-of-State investors who have invested in texas real estate. Trey Wilson is the principal of R L Wilson, P.C. Law Firm. he may be reached at 210-223-4100 or www.sa-law.com

Good Lawyer Needed...and Free Legal Forms Won't Cut It!

For grins and giggles, I did a Google search for "free legal forms" this evening. I was amazed to see 6,610,000 results returned in 0.13 seconds. Yes, six and one-half million hits! Heck, with that type of mass availability of documents for every conceivable transaction, who needs a lawyer?

There are literally millions of links to millions of sites offering everything from Wind Leases to Partnership Agreements, to complex Mortgage Loan Agreements...and they're all "free" for the taking. As a lawyer who routinely drafts Leases, deeds, powers of attorney, purchase and sale contracts, by-laws and other legal documents, I was more than a little disconcerted. Am I being obsolesced by the Internet -- just like travel agents and newspapers? What will I do? Is it finally time to pursue my lifelong dream of working as a Texas Game Warden? Do I need to trade in the ties for sunscreen and ballcaps?

Alas, after just a few minutes of following those links, I breathed a sigh of relief -- and maybe even slight disappointment. Turns out that those prophetic lyrics from Jimmy Buffett's "A Pirate Looks at 40" ("My occupational hazard being my occupation's just not around") weren't quite appropriate for me. In fact, I was instantly assured that the Free, EZ, Lawyer-in-a-box, Do-it-yourself, file it yourself, skip-law-school-and-the-bar- exam, forms are hardly any competition at all. Guess my time as a guardian of Texas' wildlife and natural resources will have to wait....

The internet has been called the "information superhighway." Its appeal has largely been the vast amount of information made available on it. All just a click away (better than being a "heartbeat away" I suppose). These days, you can find anything and everything on-line, much of which is yours with a simple click on the "download" button. But what are you really getting when you obtain free legal forms for use in your business, investments, and affairs? Far too often the truth is that you are getting exactly what you're paying for on a free site!

Legal forms have far reaching implications. They are significant and important. Lawyers do not give them out for free because they are powerful, and like Spiderman taught us all ..."great power requires great responsibility." Pre-packaged, and particularly free legal forms will often hurt you in the long run. Many times, they will end up costing much more than what you save by not hiring a lawyer to draft your legal documents based upon a thorough understanding of the particulars of your circumstances.

Here are a few basic and very serious concerns about pre-packaged Legal Forms.

1. The pre-packaged legal forms are designed very generally so that they enjoy broad applicability to large group of persons (the public, generally). They are not crafted to apply to your situation and facts. I call this "shotgun blast" law because the people pushing the generic forms get lots of "bang" from the bucks they spent posting the form documents. However, your important legal matters need a skilled rifle sniper who has intimate familiarity with your circumstances. Casting a bait net rarely yields a prize fish, and mass-appeal legal documents may very well miss important nuances of your situation!

2. Not all states or jurisdictions apply the same laws. For example, certain lease, contract and interest provisions which are perfectly legal and quite common in Pennsylvania may be frowned upon or perhaps even illegal in Texas. With free legal forms, you have no way of verifying which State the forms were drafted in, or which State's laws they track. The vast majority of disputes and transactions affected by legal forms are governed by state law. What is legal in New York or Louisiana may be illegal in Texas, and could void a contract that you need need to be valid. Without a lawyer's input, you have no way of verifying the applicability or legality of the provisions of a pre-packaged legal form.

3. The source of the free legal documents is often unknown. Anybody can upload to the internet a "form" or document they have crafted. I wouldn't be any less comfortable having an anonymous person draft my legal documents than I would having my mechanic review my X-Rays. What are the qualifications of the people posting the free documents? How do they make their money? Are there really 6.6 million benevolent souls who are also knowledgable in the law and capable of posting free databases to Google? I think not....but neither of us will ever know.

In sum, free, downloadable legal forms are simply not trustworthy or reliable. They are generally not worth the paper they are printed on, or the pixels they consume on your computer monitor. The money you save by not paying a lawyer to draft and review your legal documents could be spent several times over if your flimsy legal document ends up causing you to get sued...or worse. I know you'd rather pay anything than legal fees. I understand that many people think lawyers charge too much. Please understand, we lawyers generally charge a rate for the value of our services. Our time is our stock in trade. At my law firm, we spend that time in an effort to give you confidence and peace of mind. Surely that's worth a few hundred dollars an hour? In the end, it may save the several thousand we will be forced to charge to defend an invalid legal document.

Trey Wilson is a real estate, construction, water and general litigation attorney in San Antonio, with a Texas-wide law practice. He routinely drafts real estate and other legal documents including deeds, partnership agreements, Leases, Purcase and Sale Contracts, Powers of Attorney, Mortgage Agreements, and Promissory Notes. Though he dreams of being a Texas Game Warden, he has determined that the internet has not obsolesced his line of work, and that he continues to provide a very valuable service to his clients (apologies to Mr. Jimmy Buffett). For that reason, he'll buy more ties, and hold-off on memorizing the Texas Parks & Wildlife Code...for now. Trey Wilson may be reached at 210/223-4100 or www.sa-law.com

Tenant Lock Out Rights in Texas. Is a Lockout the Same As An Eviction?

A Lockout Is Not An Eviction - It's a mechanism used to get the attention of the Tenant and to force them to contact management and make arrangements to pay any past due rent.

A landlord can lock out a Tenant for non-payment of rent for no more than two hours after the Tenant requests re-entry. There are multiple rules from the Texas property code that Landlords must follow:

1) They must give you written notice in your lease either in bold or underlined print that they reserve the right to lock you out for non-payment of rent or other fees. If you are late with your payment they then must again give written notice of past due rent and late fees and of their intent to lock you out.

2) They can not lock you out or change the locks while you or any or guest occupies the rental unit.

3) If your are locked out the landlord must return full access with 2 Hours of your request and can not require your to pay any rent amount or late fees before allowing you re-entry. If they do not allow access they are subject to prosecution on an criminal misdemeanor charges as well as civil fines and court cost. Under no circumstances tamper with or remove the landlords lockout device because they can fill criminal charges against you. If the property management company does not let you in and provide you with a new key within 2 hrs call 911 and ask them to send an officer to assist you to gain access and be sure to get an Incident number so you can be can not be prosecuted. This will also help with your case for cash damages of up to 1 months rent, plus $500 and Attorneys fees - minus any past due rent..

4) Your management company can not use "off duty" Police or Law enforcement officers to try to force you to allow them to change the locks or allow them to remove property that is subject to "A landlords Lien." If a police officer who is being paid or receiving compensation such as free or discounted rent cannot " Use The Color Of their Badge" to do the landlords bidding in relation to your nonpayment of rent, lockout or landlords liens. It is must certainly a conflict of interest and is subject to criminal prosecution for "Official Oppression" - Texas Penal Code - Section 39.03 for the Law Enforcement Officer. Both the landlord or the landlord's agent who instigates such action is also subject to civil and criminal prosecution.

If this happens do not step outside you door or allow the officer working as a security officer for the complex inside your apartment. They may try to arrest you " for disorderly conduct" or some other trumped up change that judges tend to give them the benefit of the doubt for.

In a non-treating voice inform them that their actions appear to be a "Conflict Of Interest" and are verging on "Official Oppression" and you want another police agency to intervene. Close the door and then you should then call 911 and ask them to send another law enforcement agency to send a supervisor and make a complaint for "Official Oppression" which is a federal and state civil rights violation. When the other agencies officer arrives allow him and him only into your residence and state your case, call the local Justice of the peace and ask him to speak to the officer. Always ask for an Incident report number for your compliant.

If you feel that you have been improperly locked-out, or that your landlord will not abide by the law without your resorting to Court attention, call a lawyer experienced with evictions, such as San Antonio attorney Trey Wilson of R L Wilson, P.C. Law Firm.